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From Briefing.com: 4:19PM Advanced Micro beats by $0.10 (AMD) :Reports Q3 (Sep) earnings of $0.18 per share, $0.10 better than the Reuters Estimates consensus of $0.08; revenues rose 20.9% year/year to $1.52 bln vs the $1.38 bln consensus. AMD reports gross margin 41% vs 41.5% street expectation. Co expects fourth quarter microprocessor sales to grow between 7-13% sequentially.

4:20PM : Marooned within a trading range that kept the indices on both sides of the flat line, the stock market was roiled today by reinvigorated energy price action and continued inflation concerns that overshadowed expected Q3 earnings growth. Although a pair of upside Q3 earning reports, from Alcoa (AA 22.87 +0.21) and Genentech (DNA 84.50 +2.50) during yesterday's after hours session, gave traders early reason to reverse respective declines of 3.2%, 3.4%, and 3.5% on the Dow, S&P, and Nasdaq over the last six sessions, gains were once again unsustainable and fell victim to heightened selling pressure during the final hour of trading. General Motors' (GM 26.51 +1.03) 4.0% gain, which was supported by reports that investor Kirk Kerkorian has received antitrust clearance to raise his stake in the company to 9.9%, stood as one of the market's only crutches and enabled the Dow to finish with a modest gain after hitting a five-month low yesterday. Energy price action drained much of the early steam, and a report from the American Gas Association that indicated home heating bills will increase 50% this year further agitated traders and diverted attention from the Q3 earnings season's commencement which is expected to reveal 15% earnings growth. Crude's rebound, alongside the gains in both gasoline and natural gas, fueled a 2.1% rise in the Energy sector today, but, aside from that sector's gain, leadership was again absent. Utilities had staged a parallel rebound after suffering some profit-taking, but sellers pared the sector's gain to a modest 0.1% by the session's close. Consumer Staples (+0.1%) and Materials (+0.1%) were the only other sectors on positive ground, but similarly headed towards the unchanged mark just ahead of the bell. For its part, Dow component Alcoa served as Materials' backbone, rising after Q3 EPS of $0.33 beat analysts' expectations by $0.04; upside momentum was limited, however, by the fact it had issued a profit warning in September. On the other side of the aisle, Telecom (-1.7%) led the way lower, but it was the 0.6% and 0.4% declines respectively incurred by Financials and Technology that served as the market's biggest impediments. With continued attention to the flattening yield curve, and challenged particularly by banks' and brokers' extended weakness, sellers again targeted the sector. The 2:00 ET release of minutes from the FOMC's Sept. 20th meeting validated inflation fears and underpinned the sense that the Fed will likely stay on its tightening course longer than previously expected, and thus did not make matters any better for the sector or for the inflation-flustered market. The recognition, though, that the Minutes revealed nothing entirely fresh and that the news has already been accounted for in stock prices perhaps limited the report's effect. As for the Technology sector, broad-based weakness throughout the semiconductor group, especially strong follow-through selling in Xilinx (XLNX 22.07 -0.70), weighed most heavily on the sector. Software also lost ground, as a Q2 sales warning from Compuware (CPWR 7.52 -0.74) offset an analyst upgrade on Electronic Arts (ERTS 52.86 +1.51). Perhaps limiting the Tech sector's slide, however, was relative strength in hardware. The group was in focus all day after CSFB upgraded IBM (IBM 83.19 +1.94) due to improving margins, after NCR (NCR 32.24 +1.29) raised its Q3 earnings outlook, and amid anticipation of Apple Computer's (AAPL 51.59 +1.22) post-bell Q4 (Sept.) earnings report. DJTA +0.60, DJUA +0.56, DOT -0.57, Nasdaq 100 -0.50, Russell 2000 -1.10, SOX -1.67, S&P Midcap 400 -0.57, XOI +1.96, NYSE Adv/Dec 1255/2020, Nasdaq Adv/Dec 851/2142

9:58AM Harley-Davidson (HDI) Citigroup upgrades Hold to BUY. Target $53 to $55. Citigroup upgrades HDI as they believe dismal trends and downward forward guidance are already priced into the stock. Firm thinks business trends may have improved based on their channel checks, and think growth trends in the last 2 months of the qtr have accelerated, driven by its new product introductions.
9:57AM OSI Pharm (OSIP) Bear Stearns downgrades Outperform to PEER PERFORM. Bear Stearns downgrades OSIP following DNA's reported Q3 US Tarceva sales of $73.2 mln compared to firm's est of $78 mln. Firm says that while they believe downside for the co is limited in the near-term, they are surprised by the slowdown of Tarceva sales in 3Q/2Q and see little upside into 2H06 without robust Tarceva growth.

9:56AM Electronic Arts (ERTS) Citigroup upgrades Hold to BUY. Citigroup upgrades ERTS saying while the risk of negative guidance revision remains, long term investors would benefit from building positions ahead of the Xbox360 launch (11/05) and PS3 (Oct/Nov'06 in N.Amer&Europe). Firm believes recent stock declines should sufficiently price in risk for Q2 (Sep) release (where firm assigns 50% probability mgmt will lower full year guidance or inc the F4Q weighting, both of which would be perceived as negative).

9:55AM Nokia (NOK) RBC Capital Mkts upgrades Sector Perform to OUTPERFORM. Target $20 to $22. RBC Capital upgrades NOK based on: 1) strong handset demand as they enter the holiday selling season, 2) their conviction that the co finally has a competitive product portfolio, 3) and their view that the co should benefit from stabilizing operating margins. Firm also says that although infrastructure pricing remains competitive and margins should decline in 3Q05, they are looking for stabilizing trends in 4Q05.

9:54AM SigmaTel (SGTL) Needham & Co downgrades Buy to HOLD. Needham downgrades SGTL following negative preannouncement. Firm says the co cited shipment delays resulting from back-end production issues, and is likely to guide conservatively in December given continuing production issues in October and concerns about holiday sell through rates. Given anticipated cautious December guidance, an intensifying competitive environment and the drag on earnings from recent acquisitions, they fail to see a significant catalyst in the near future and recommend investors move to the sidelines.

9:53AM Cooper Cos (COO) Oppenheimer initiates BUY. Target $85. Oppenheimer initiates COO citing the co's significant exposure to the all-important specialty sector, as well as the strategic and financial benefits that they see accruing from the acquisition of Ocular Sciences. Firm now believes that previous inventory issue is in the past and expects the co to be able to fend off competitive silicone hydrogels in the US until mid-2006, when it unveils its own offering.

9:52AM Canadian Natrl Res (CNQ) Lehman Brothers upgrades Equal-weight to OVERWEIGHT. Lehman upgrades CNQ to reflect the recent 18.5% underperformance since Aug 5, as well as the USD11.57 absolute price decline (23%) from the peak. Firm says the co offers a combination of: 1) strong, visible, production growth from existing assets over the next 7-9 years; 2) a solid balance sheet; and 3) continued progress on the massive Horizon Oil Sands Project.

9:51AM Borg Warner (BWA) Calyon Securities upgrades Neutral to BUY. Target $58 to $62. Firm would recommend aggressive share accumulation at current levels as they believe four near-term catalysts are likely to propel BWA higher: 1) expect better-than-consensus 3Q05 EPS results; 2) BWA will likely narrow its FY05 guidance by increasing the bottom-end of the range; 3) co is expected to disclose its forward 3-year backlog (2006-2009) which they estimate will be at least $1.6-$1.7 bln, revised upward from prior 3-year est of $1.4 bln; and 4) possible dividend increase announcement.

9:49AM Select Comfort (SCSS) Miller Johnson initiates BUY. Target $30. Firm believes SCSS is well positioned to gain market share and grow its EPS 25% to 30% for the next several years. They say SCSS is a unique co in the bedding industry in that it is both a manufacturer and retailer of its products, allowing it to control the selling process and capture higher margins than its competition.

9:48AM Curtiss-Wright (CW) Am Tech/JSA Research downgrades Buy to HOLD. Amtech/JSA Research downgrades CW due to lower sales and margin assumption for the upcoming earnings report. Firm cuts their Q3 EPS est to $0.74 from $0.84 (consensus $0.83), and cuts their 2005 EPS est to $3.35 from $3.50 (consensus $3.42), to the low end of mgmt guidance. They say mgmt has previously indicated that Q3 earnings were expected to be in-line or slightly below the Q2 level of $0.82. Firm's model reflects this Q3 guidance, but with some additional weakness tied to some sales shifting into Q4.

9:47AM Overland Storage (OVRL) Robert W. Baird upgrades Underperform to NEUTRAL. Target $7 to $8. Baird upgrades OVRL following ADIC's filing an open letter of intent to acquire the shares of OVRL for $7.90 with the SEC. While they continue to believe the co stand-alone faces significant challenges with the loss of HP, they believe the market will price OVRL as an acquisition candidate around ADIC's stated $8.

1:48PM Gannett (GCI)
66.35 +0.16: Founded in 1906, Gannett Co is the largest newspaper group in the US with a combined daily circulation of 7.6 mln. Today the publisher of USA Today reported a drop in third quarter profits, as rising newsprint costs and lackluster advertising revenues, with the absence of the Summer Olympics and political advertising, weighed on earnings.

Net income fell 4.3% to $297 mln, or $1.22 per share, from $310.2 mln, or $1.18 in last year's quarter. Earnings from continuing operations declined to $275 mln, or $1.13 per share - a penny below the Reuters Estimates consensus. The top line rose a mere 4% to $1.86 bln, reflecting a challenging advertising market due to the timing of the Summer Olympics and political ad spend in last year's third quarter. The absence of these events, coupled with softer advertising demand in the automotive segment, negatively impacted both TV and newspaper ad sales. Gannett earns almost 70% of profits from newspaper advertising, which grew a meager 1.1% pro forma in the quarter.

Results within the Newspaper segment were complicated by the full acquisition of the Detroit Newspaper Partnership. Overall, domestic papers posted solid gains, yet higher newsprint and interest costs restrained results. Total newspaper segment operating revenues were $1.70 bln, representing an increase of 7.1% y/y. On a comparison basis, advertising revenues rose 1.3%. This includes an increase in classified ads of 1.4%, led by the employment and real estate markets, offsetting a 9% drop in automotive. Local advertising revenues rose 1.3% while national ads remained flat. Operating expenses outpaced revenues, gaining 9% due principally to the full consolidation of the Detroit operations. Excluding the acquisition, operating expenses would have risen 1.7%. Advertising revenues for USA Today fell 2.7%, again due to the lack of significant political and Olympic business.

Within the Broadcasting segment, revenues declined 19.3% to $166.4 mln. To see just how much these events swayed Gannett's quarterly performance, last year's Q3 included $50 mln in linked advertising demand. EBITDA margins declined across the board. The Newspaper segment contracted by 120 basis points to 28.5% and Broadcasting plummeted ten percentage points to 41.5%. Operating margins fell 280 basis points to 25.4%.

Overall, this was a low quality result as share buybacks and a lower tax rate helped support earnings per share. Still, there were areas of promise. The UK properties have been particularly poor, as a weakening economy has lowered advertising spending. Excluding the UK, US newspaper ad revenues increased approximately 4% in September and 3% for the entire quarter. Also, Gannett was able manage the cost headwinds from hurricanes and rising newsprint and fuel costs quite well. While management did not provide any earnings guidance, it stated the fourth quarter for USA Today "looks better," as it faces easy comps of -5.3% last year.

Gannett will continue to focus on returning value to its shareholders through share repurchases and acquisitions. The stock trades at 13.2x forward earnings, an attractive valuation when compared to its peers, which include Tribune (TRB) at15.0x, New York Times (NYT) at 18.6x, and Knight Ridder (KRI) at15.x. Gannett is the first out the gate for the group, which has suffered continual selling pressure on concerns advertisers are taking their dollars to the web and to cable television. With shares down almost 20% year-to-date, however, the downside risk appears limited. ---Kimberly DuBord, Briefing.com

11:20AM Genentech (DNA)

85.56 +3.56: Biotechnology company Genentech continued its torrid run of success when it reported third quarter earnings ahead of analyst expectations late Monday, fueled by strong sales for its portfolio of oncology drugs, which include Avastin, Herceptin, Rituxan, and Tarceva. For the third quarter, Genentech reported a profit, excluding one-time items, of $383.8 million, or $0.35 per share - five cents above the consensus estimate and up approximately 46% on a per share basis from last year. At the same time, the company raised its full year EPS guidance from a year/year increase of 35% to 50%, which translates to about $1.25. On average, analysts had projected earnings of $1.20, according to Reuters Estimates.

The San Francisco-based company said operating revenues for the period rose 46% to $1.75 billion, as compared to $1.20 billion in the third quarter last year. Total product sales increased 44% year/year to $1.45 billion, with sales of Avastin and Herceptin growing at a robust double-digit clip. Domestic sales of Avastin, a first-line treatment of colorectal cancer, accounted for $325.2 million in sales in the quarter, a 78% increase from $183 million in sales for the year-ago period. Meanwhile, sales of the company's Herceptin, an antibody for the treatment of metastatic breast cancer, increased 70% to $215.1 million from $126.3 million last year. Sales of Genetech's cancer drugs (Avastin, Herceptin, Rituxan, and Tarceva) amounted to $1.07 billion, or approximately 74% of total U.S. product sales, while legacy products, including growth hormone, cardiovascular products, and Pulmozyme, totaled $193.1 million, an increase of 9% year/year.

Commenting on the solid third quarter results, Ian Clark, Senior VP of Commercial Operations, said, " We are very proud of the strong bio-oncology business that we have built; for the first time in Genentech's history, quarterly oncology U.S. product sales topped one billion dollars." He added that the company is investigating the use of Avastin and Herceptin outside of their approved uses to treat other forms of cancer. Genetech has been actively working with the FDA to establish filing timelines and to prioritize potential new filings related to ongoing clinical success in its oncology pipeline. The company is expecting to file a supplemental Biologics License Application (sBLA) in the first quarter of 2006 for Herceptin in the adjuvant setting based on data from U.S. studies. In addition, it is preparing for potential filings for Avastin for first-line metastatic ovarian cancer.

Separately, Genentech provided additional information on the pending reexamination of the Cabilly patent. It estimates that a final resolution from the U.S. Patent and Trademark Office may take from two to twelve months, and that any appeals may take several years. For the third quarter, income related to the Cabilly patent was approximately $20 million, or $0.01 per share. Genentech believes that the third quarter income associated with the patent represents roughly one-quarter of the full-year's expected results, excluding charges. As such, the outcome of the dispute could potentially reduce estimates.

Despite the pending patent dispute, however, Genentech's fundamentals remain strong and underscore the current value proposition. Trading at roughly 72x forward earnings, the company commands a significant premium. Given the ongoing strength of the business and the recent pullback in shares, however, the valuation appears increasingly attractive. While investors should not expect the heavy upside as in the past, Genentech continues to present a notable growth story. --Richard Jahnke, Briefing.com

10:23AM Alcoa (AA)

23.29 +0.63: The official kickoff for the third quarter earnings season took place after Monday's close when Alcoa, one of the "Dow 30" reported its results. After putting a damper on expectations on September 22, Alcoa surpassed the revised consensus estimates.

As anticipated, earnings were impacted by lower aluminum prices and higher input costs - namely energy. Weakness in the automotive industry and in Europe also added to the challenges Alcoa faced in the quarter. Alcoa reported earnings of $289 mln, or $0.33 per share, compared to $283 mln, or $0.32 per share last year. Income from continuing operations was basically unchanged from last year at $290 mln. Alcoa came in four cents ahead of expectations and its own forecast of $0.27-0.31 cents per share. However, the $0.33 reported is a far cry from the consensus estimate of $0.44 seen in August.

Even though revenues increased 13% from last year to $6.57 bln y/y, the top line contracted from $6.7 bln in the second quarter due to lower realized alumina and aluminum prices. Metals prices have strengthened somewhat recently, which Alcoa said it expects will be reflected in Q4. Performance was poor across its entire business, but the pain was felt most in its two largest profit centers, Alumina and Primary Metals. Both units suffered severe declines in operating margins of 500 and 260 basis points, respectively. Although average realized prices have improved 54% from last year to $1,963 mt, prices have continued to trend downward over the last three quarters.

So what caused the upside beat? Continuing strength in the aerospace and the commercial trucking industries helped support the bottom line. Alcoa is navigating through treacherous waters. It has made considerable progress over the last few years in improving productivity, but management cannot control input costs like natural gas, which has now reached historic highs in the wake of the hurricanes. Management confessed the pace of escalating costs in energy and raw materials was no match for them. Add on a reduced upstream pricing environment and it was no big surprise to see that profitability was greatly impaired. Alcoa closed the quarter with 24% operating margins, down from 25.5% in Q2.

Looking at the balance sheet, Alcoa has been able to improve its debt to capital ratio, which now stands at 31.5%, up 70 basis points from Q2. Cash from operations was $792 mln at the end of the third quarter, before a $300 mln contribution for employee pensions. At the start of the second quarter, Alcoa entered the second stage of its 2005 restructuring plan. It expects the plan to result in the elimination of 8,100 jobs and $195 mln from its cost base when fully implemented over the next months. To date the company has only made roughly 1,400 of the aforementioned job cuts.

The market is warmly welcoming the upside surprise in Alcoa's report. However, we would caution investors as the cost-price pressures for this manufacturer will continue to weigh on profits for the near-term. Year-to-date costs have risen $752 mln, of which $374 mln is related to energy. Higher energy costs are squeezing Alcoa on both ends in manufacturing costs and in weaker end-market demand. The automotive space teeters on the brink, as record gas prices have turned consumers away from gas-guzzling SUVs. Further, rising interest rates, a rebound in the dollar, higher production costs, and excess supply could continue to pressure margins. Alcoa is faced with a daunting task to stem the tide through its cost initiatives. With raw material costs enduring offsetting seasonal trends, we think Alcoa will be hard-pressed to repeat this performance in the fourth quarter. ---Kimberly DuBord, Briefing.com

8:43AM Page One - Earnings Season Starts Up

Earnings season has started. Stock futures suggest a modest up open.

After the close yesterday, Alcoa reported earnings 4 cents ahead of expectations. Alcoa is usually the first to report, but this time the suspense was lessened because the company had warned back on September 22. The company only beat lowered expectations. Nevertheless, the stock got a boost in after hours trading.

Genentech reported earnings 5 cents ahead of expectations and up 46% on a per share basis from last year. Revenue was up 45.8% and the company guided profit estimates for the full year higher. This is a genuinely good report and the stock was up over 5% in after hours trade.

This morning, Gannett reported earnings a penny below expectations. Infosys beat by 3 cents and guided profit estimates higher for future quarters. Helen of Troy had a bad report.

After the close today, Apple Computer and Advanced Micro Devices are due to report. Tomorrow brings Harley-Davidson, Host Marriott, Monsanto, Apollo Group, Sonic, and Lam Research. Companies due to report Thursday include Landstar Systems, Tribune, and Fairchild Semiconductor. Friday brings General Electric, UnitedHealth Group, First Data, Boston Scientific, and Knight-Ridder.

Next week the reports come in droves.

Aggregate operating earnings for the S&P 500 should increase by approximately 15%. That reflects a pickup from the growth rate in the first half of the year. Energy companies will lead the gains again, but broad based gains are expected (the autos will drag down the consumer discretionary sector, however).

A focus on the good earnings trends could help stabilize the market and creates an opportunity for a classic earnings season rally. This morning, oil prices are up a bit to $62 a barrel. There are no economic releases but the September FOMC minutes will be released at 2:00 ET. This presents something of a risk if the minutes reflect significant concern over inflation trends. -- Dick Green, Briefing.com